Transition management still suffers from a lack of transparency
and client understanding, according to Clive Adamson, director
of supervision at the UK Financial Conduct Authority
(FCA).

Speaking at the FCA’s annual asset management
conference in London, Adamson gave some insight into the
results of the regulator’s investigations into the
sector which are due to be published before the end of the
year.

The investigations have focused on discovering whether poor
transparency and opaque legal documentation could lead to poor
consumer outcomes in the provision of this service.

"What we found is that the asymmetry of knowledge between
providers and customers, combined with the potential for
conflicts of interest to arise on such complex and fast moving
transitions mandates may lead to adverse outcomes," said
Adamson.

But he was optimistic about the potential to improve transition
management services through the use of data and better
understanding.

"While transparency remains a problem within transitions
management, we believe the provision of more data and greater
customer understanding is empowering customer decision-making
and will be working with providers and customer groups to
ensure improvements continue to be made."

The sector has come under scrutiny from regulators in recent
years following allegations that several pension funds
were overcharged by State Street’s transition
managers, although no formal enforcement proceedings have been
brought.

When the case came to light, the funds involved were repaid
the amounts overcharged and the executives involved are no
longer with State Street. The firm has also cooperated with the
regulator’s investigations.